Start with a full-service broker. They are often best for new investors who may still need to build confidence and knowledge of the markets.
As you become a more sophisticated investor, you can start investing your money yourself.
You get what you pay for!
As with anything you buy, the price may be indicative of the quality. Don’t open an account with a broker simply because they offer the lowest commission cost.
Rates vary between zero and $40 per trade, with the average around $20 and there may be fine print, specifying which services the rate will actually entitle you to.
In most cases there will be higher fees for limit orders, options and those trades over the phone with your broker.
You might find that the advertised commission rate may not apply to the type of trade you want to execute.
See how much of an initial deposit the firm requires for opening your account.
Beware of high minimum balances! Some companies require as much as $10,000 to start. This might be fine for some investors, but not for others.
Try the company’s website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties.
Check to see what other options the firm offers for placing trades. Other alternatives may include touch-tone telephone trades, faxing ordering, or doing it the low-tech way – talking to a broker over the phone.
What are others saying about the brokerage?
As you should do your research for a stock, you should find out as much as possible about your broker.
When choosing a brokerage, most people are probably thinking primarily about buying stocks.
Remember there are also many investment alternatives that aren’t necessarily offered by every company.
This includes CDs, municipal bonds, futures, options and even gold/silver certificates.
Many brokerages also offer other financial services, such as checking accounts and credit cards.
There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the company’s help desk with a fake question to test how long it takes to get a response.
Return on Cash
You are likely to always have some cash in your brokerage account. Some brokerages will offer interest on this money, while others won’t offer you a thing.
Find out what they offer!